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Wednesday, August 26, 2009

Developer has undertaken to bid at least $200 psf ppr for Serangoon condo site

For the fourth time in about a month, a 99-year leasehold site on the government's reserve list has been triggered for release, as developers seek to replenish their landbanks with suburban condo land after the run-up in home sales.

Market watchers expect more successful applications from developers for the launch of reserve-list sites in the coming months. The latest plot is attractively located at Serangoon Ave 3. It is right next to Lorong Chuan MRT Station and not far off from the Australian International School.

A developer, not named so far, has undertaken to bid at least $83.7 million or about $200 per square foot per plot ratio (psf ppr) for the site, which consultants say can be developed into a condominium with about 300-370 units, depending on units sizes and mix.

Consultants polled by BT generally expect top bids for the plum site to be in the $350-450 psf ppr range, with resulting breakeven costs of about $700-850 psf and target selling prices of $800-1,100 psf on average.

DTZ's head of SE Asia research Chua Chor Hoon notes that units in the Goldenhill Park Condo and Amaranda Gardens nearby have transacted at about $810 psf to $950 psf in the past three months. She projects top bids of about $370-450 psf ppr for the latest plot and reckons that the bidders could be eyeing average selling prices of $1,000 to $1,100 psf when the project on the site is ready for launch in about a year.

Urban Redevelopment Authority will launch the tender for the site in about two weeks. Competition will be hot, with more than 10 bids expected.

Last week, the tender for a condo plot at Chestnut Avenue - less attractively located than the latest land parcel - pulled 13 bids and a much-higher-than-expected top bid of $280 psf ppr by a City Developments and Hong Realty tie-up. The two other reserve list sites triggered recently and whose tenders have yet to close are a condo site at Dakota Crescent and a commercial and residential plot at the corner of Yio Chu Kang and Seletar roads.

Knight Frank executive director (residential) Peter Ow says a condo on the latest plot next to Lorong Chuan MRT will appeal to investors looking to rent out apartments to Australian expat families, given the site's proximity to the Australian International School.

'There's also a good base of demand from HDB upgraders in the Serangoon and Ang Mo Kio vicinities. In addition, some of those living in the surrounding landed estates may be keen to buy a condo unit for their children or as investment,' he adds. Mr Ow expects the highest bids for the land parcel to be about $350-$450 psf ppr, reflecting a breakeven cost of $700-850 psf.

A condo on the plot will be just one station away from Serangoon MRT, where the 'nex' mall is coming up. 'The site is in an established housing estate, with both landed homes and condos, and is also near neighbourhood schools,' observed Ngee Ann Polytechnic real estate lecturer Nicholas Mak. His projection of top bids at $240-315 psf ppr, however, was the lowest of the four property market watchers polled by BT yesterday.

Colliers International executive director (investment sales) Ho Eng Joo, who forecasts top bids in the $350-400 psf ppr band, expects developers to trigger more sites for launch from the reserve list.

The government will release a site in this list for tender only upon successful application by a developer that undertakes to offer a minimum price that is acceptable to the state. Still available on the reserve list are sites that can yield condos near Bishan, Bartley and Bedok MRT stations. Also on offer are plots in places like Yishun, Tampines, Upper Thomson, Jalan Jurong Kechil and Upper Changi Road North.

While developers did not buy residential land last year during the global financial crisis when home sales dried up and funding was tight, they enjoyed a sudden, strong run-up in homes sales between February and July that has left even many developers surprised.

This has had the effect of shrinking the supply pipeline of mass-market homes, especially those on 99-year leasehold sites bought at state tenders. This has tempted developers generally to raise prices across various tiers of the market. However, lately some buyers have started to respond by withdrawing to the sidelines again either because they are priced out or they feel prices are starting to run away again.

A good gauge of affordability and resistance levels will emerge later this week when NTUC Choice Homes previews its 590-unit Trevista condo in Toa Payoh.

The analysts say mass launch prices have hit 2007 peak, and may stagnate

LAUNCH prices for new private homes rose 10 per cent and 18 per cent in prime and mass districts respectively in the first half of 2009, according to UBS Investment Research.

On the back of this, analysts Regina Lim and Michael Lim now expect prime prices to rise 18 per cent from here to 2007 peak by end 2010, as interest continues to improve and foreigners start to buy. However, luxury prices are not expected to reach the $4,000-$4,500 per square foot (psf) levels seen in 2007. By contrast, mass launch prices have reached the 2007 peak due to fervent buying by locals and prices could stagnate at current levels, the analysts said in an Aug 24 report: 'For mass market launch prices, we believe they could stagnate at current levels after rising around 20 per cent in 2009.'

UBS' research also showed that most of the demand for private homes this year came from local buyers. In the first seven months of 2009, developers sold over 10,100 units, mostly in mass market condominiums where buyers were largely Singaporeans.

'In H1 2009, we saw a sharp increase in buyers who currently live in public housing (HDB),' said the report. For new sales, 54 per cent of buyers had HDB addresses, compared with 24 per cent in 2007. For resale transactions, 44 per cent of buyers had HDB addresses, compared with 22 per cent in 2007. In addition, a large portion of non-Singaporean buyers were permanent residents.

Looking ahead, UBS believes that demand for prime residential units will grow as interest grows among foreigners. 'We saw signs of improvement for prime units in Q2 2009,' said the report. 'In Q2 2009, resale transactions in the prime districts increased more than five times to 230 a month, from 42 a month in Q1. Prime resale transactions now make up 24 per cent of all resale transactions, compared with 16 per cent in Q1 2009 and 30 per cent in Q1 2007.'

The price growth that UBS expects will be supported by low completions supply, the analysts said. UBS expects the total number of homes to be completed from 2009 to 2015 to be around 16,000 per year - similar to the levels in 2000-2008.

'We believe this is not excessive, if we expect population growth to be 2.4 per cent, which translates to around 116,000 persons per annum,' said the report. 'We believe that supply is reasonable and we expect rental growth in 2009-2015 to be at least 5 per cent compound annual growth rate (CAGR) as completions are similar to 2000-2008, yet population growth is expected to be 15-20 per cent higher.'

However, other analysts here are less bullish. RBS Singapore analyst Fera Wirawan said recently that residential property prices could fall 10 per cent to 20 per cent over the next 12 months on back of anti-speculative measures, falling rental yields and increasing supply.

Based on her analysis, prices of mass-market homes are now at peak 2007 levels, while prices of mid-tier and high-end homes are just 8 per cent and 22 per cent off their peaks respectively.

EVEN as the dust settles on Hong Leong Group's top bid at last week's tender for a 99-year condo site at Chestnut Avenue, a discussion in some circles now centres on whether Hong Leong overpaid for the site.

As expected, Housing & Development Board said yesterday evening it has awarded the site to Sunny Vista Developments (a subsidiary of City Developments) and Hong Realty.

The two companies are part of the Hong Leong Group and teamed up to place the top bid of $143.68 million, which works out to a much-higher-than-expected land cost of $280 psf per plot ratio (psf ppr).

Some rival developers believe Hong Leong's breakeven cost may be around the $600 psf mark and its projected average selling price near the $700 psf level. Sources, however, suggest the group may have been eyeing a much higher average price, in the high-$800 psf range, when it cast its bid.

That would set a benchmark for a 99-year leasehold condo in the area.

Hong Leong Group executive chairman Kwek Leng Beng said in a written reply to BT: 'We can see potential in an area where some others may not... We are very familiar with this locality... There is now a lack of good and affordable residential developments in the vicinity. We are confident that there is a vibrant market there.'

The tender attracted 13 bids and marked the first time in about a year that the government had sold land for private residential development. Clearly, developers are famished for land after a stretch of strong housing sales over the past six months. The Chestnut Avenue plot in the Bukit Panjang area was on the government's reserve list when it was triggered for release after a successful application by a developer that undertook to bid at least $62 million or about $121 psf ppr.

Here are some indicators of Hong Leong's bullishness. Its bid was 2.3 times the minimum price. Seven of the 13 bids were bunched in the $169-182 psf ppr range; the winning bid was 54 to 66 per cent above this.

Hong Leong's bid was 11.3 per cent higher than the next highest offer of $251.60 psf ppr placed by rival Far East Organization. The site is not near an MRT station but one advantage of its location is that units on the upper floors of a condo on the site will enjoy views of the nature reserve next to Upper Peirce Reservoir. Hong Leong's new project on the site is expected to be profitable, but it remains to be seen just how high a price it will be able to achieve.

The aggressive winning bid has set the stage for toppish bids at next month's tender for a 'hotter' site at Dakota Crescent next to an MRT station, fronting Geylang River and much closer to the city. It will also raise pressure on other reserve list sites that are triggered. In other words, land prices are set to escalate. Ditto for the prices at which developers later market new projects on these sites.

Mr Kwek insists that the outcome of the Chestnut Avenue tender shows the reserve list system - where the government launches a site for tender only upon successful application by a developer - is working well. 'The property market has still not fully recovered yet and although the economy is improving, it has not recovered too,' he added.

Last October, the government suspended sales of sites on the confirmed list, where sites are launched for tender according to scheduled dates. Instead, it has offered sites solely through the reserve list; this market-led approach was thought to be suitable amid the housing sales slump at the time.

However, in the first seven months of this year, developers sold a stunning 10,017 private homes - more than double the 4,264 units they sold in the whole of 2008. This has enabled developers to flex their muscles. Prices of mass-market condos today are about 10-15 per cent higher than the lows of Jan-Feb 2009, according to one developer's estimate.

One reading of last week's tender result is that some developers do not believe the pace of land sales from the reserve list will be fast enough for them to replenish their mass-market housing landbanks - despite the fact that three such sites had already been triggered in the one month preceding last week's tender close. And the likes of Mr Kwek thus need to bid aggressively to get their hands quickly on some much-needed land.

Here's a possible signal he may have inadvertently sent to the authorities, who are keen to assure the home buying public there is enough supply of private homes and land: please expedite the release of more land.

There may be a case now for government to transfer a few of the nicer sites from the current reserve list to the confirmed list, and start launching them soon. It could also replenish the reserve list.

But selling land only through the reserve list - where government waits for a developer to apply for a site and undertake to bid at a minimum price acceptable to the state before it launches the site - can take some time.

It may be opportune for government to take the unprecedented step of restarting confirmed list land sales midway through the current suspension for H2 2009.

Time is of the essence now as developers run out of land to build entry-level private condos on. And keeping the dream of upgrading to a private condo within reach of HDB upgraders is an important part of the Singapore housing story.

(DUBLIN) A tax on Irish property is not a done deal as part of efforts to squeeze the burgeoning budget deficit, Prime Minister Brian Cowen said in an interview.

'I'm not wedded to property tax,' Mr Cowen told the Sunday Independent: 'But I don't want that to be suggested that we are not prepared to take the decisions that need to be made if that is what is deemed necessary. We have very low taxes on property in this country, if any.'

Ireland's Commission on Taxation has finished a government-sponsored report on possible changes to the system of taxation starting next year and local media have reported that it has recommended introducing a property tax based on each home's value to replace a stamp duty tied to property sales.

Ireland is targeting 1.75 billion euros (S$3.6 billion) in additional tax revenues and 2.25 billion euros in spending cuts next year on top of existing measures unveiled as part of a five-year austerity plan to get its deficit, proportionately the worst on the euro zone, under control.

Mr Cowen, whose popularity levels are at record lows amid dissatisfaction over his handling of the economy, faces a slew of tests in the autumn, including a second referendum on the European Union's reform treaty, the creation of a 'bad bank' to deal with the financial crisis and another tough budget.

'There are a lot of difficult political decisions coming down the line,' he said in a rare interview.

Mr Cowen's Fianna Fail party suffered a rout in local and European elections and two parliamentary deputies recently jumped ship in protest over hospital cuts but the 49-year-old said he was confident he had the support of his colleagues.

'The party knows there is a job of work to be done by government. People are going to have their say in terms of what the position should be,' Mr Cowen said.

'But at the end of the day, we have to close the gap between what taxes are coming in and what is being spent. If we don't do that, we put the whole future at risk.' - Reuters

(HONG KONG) Hong Kong's sales of new private homes in the first eight months of 2009 may have exceeded those during all of last year, Centaline Property Agency Ltd said.

The number of new non-government-built residential units changing hands may have risen to 10,926 from 9,955 for the whole of 2008, Centaline, one of the city's biggest real estate agencies, said in a report on Sunday.

Last year's figure was the lowest since 1996, the realtor said in January.

Home sales in Hong Kong, where luxury residences are Asia's second-most expensive, are being fuelled by record low mortgage rates and near-zero interest payments on bank deposits.

Victor Li, deputy chairman of Cheung Kong (Holdings) Ltd, the city's second-largest developer by market value, said on Aug 13 that the local property market is 'healthy' and his company may raise prices if sales improve.

The value of new private homes sold may be HK$65.5 billion (S$12.2 billion) in the first eight months, 15 per cent less than the HK$77 billion for 2008, the agency said.

Total housing sales rose for the fourth month in July, Land Registry figures show. Transactions rose 62 per cent to 12,023 from July 2008.

The government agency has not published August data and does not break down deals by new or existing homes. -- Bloomberg

Since July 1, Wing Tai has sold 269 units worth $575 million at Belle Vue Residences in Oxley Walk, Ascentia Sky in Alexandra Road and Floridian in Bukit Timah.

This compares with sales of 100 residential units worth $208.5 million for the 12 months to June 30, the end of its financial year.

Liquidity and pent-up demand, particularly in the mass market, had been driving sales, said Mr Cheng.

The economy in Asia and Singapore is not in as bad a shape as people had expected at the beginning of the year, he added. Also, retrenchments have not been as severe as initially thought.

However, the worry of a possible W-shaped recovery remains, said Mr Cheng.

'I would like to say that the market has recovered but, being a cautious person, I cannot believe that it's a V-shaped recovery,' he said.

'The fact remains that the general economy in the West has not recovered. The real economy in the West - which is the engine for the world economy - has far from recovered.'

Mr Cheng mentioned that the property market recovered around 1999 and 2000 from the Asian financial crisis, only to crash again, but quickly added that this time, the whole world had put in place stimulus packages to re-ignite growth.

Wing Tai's chairman stressed that the property market was very sentiment-driven. 'What I can say is that the mass market has probably recovered,' he said.

He pointed out that mass market homes represented good value given that their prices three months ago had still not recovered their 2007 peak.

The high-end segment - where Wing Tai is a keen player - is another story, he said, and required a lot more wealth than is being generated by the economy now.

Wing Tai did manage to sell a few units at Belle Vue for $2,400 per sq ft (psf) recently, although the condo units' average pricing is close to $1,800 psf - which is easily 10 to 15 per cent below the level it would have priced the units at during the 2007 boom, said Mr Cheng.

It has disposed of just under 100 units at the 176-unit Belle Vue. It has also sold at least 144 units at the 373-unit Ascentia Sky at $1,200 to $1,300 psf.

Wing Tai has three other high-end projects in the pipeline. It has no plans yet for these launches, though it may start construction.

Wing Tai reported a 91 per cent drop in net profit to $21 million for the full year ended June 30, mainly due to fair value losses on investment properties of $88 million.

Revenue was up 18 per cent to $507.3 million.

Excluding the fair value losses, net profit was at $108.9 million, down 31 per cent from a year ago.

The group has recommended a dividend payout of four cents - comprising a first and final dividend of three cents and a special dividend of one cent.

This is down from the six cents paid the previous year.

Earnings per share plunged 91 per cent to 2.7 cents for the full year, while net asset value per share was $2.03 at June 30 and unchanged from a year ago.

In this financial year, Wing Tai expects to collect further sales proceeds of $185 million when The Riverine by the Park and Casa Merah are completed.

ANOTHER suburban residential site on the Government's reserve list has been triggered for sale, signalling rising developer confidence.

Yesterday, an unnamed developer put in the minimum acceptable bid of $83.7 million, or some $200 per sq ft (psf), for a 1.39ha site in Serangoon Avenue 3.

MAP: LAND PARCEL

Property consultants expect to see tender bids coming in at much higher levels because the site is in an established residential area near an MRT station. The 99-year leasehold site is near Lorong Chuan station - one of the first five stations to open on the Circle Line - as well as the Australian International School.

It has a maximum gross floor area of 38,857 sq m, according to the Urban Redevelopment Authority, and can accommodate an estimated 370 housing units.

Nearby condominiums include Chiltern Park, Chuan Park and The Springbloom.

Colliers International director of investment sales Ho Eng Joo expects to see about 10 developers bidding for the site.

'Sentiment is very strong and there are no sizeable private sites available for en bloc sales. Developers are thus going for the government sites as they need to replenish their land banks.'

Strong demand at recent suburban launches has shrunk the pipeline of such condos, Mr Ho added.

Cushman & Wakefield managing director Donald Han said developers are now in a more buoyant mood and looking to replenish their land banks.

'We have been seeing site after site being triggered since July; it shows that the reserve list is working and helping to provide a steady stream of supply.'

Bids for the Serangoon Avenue 3 plot are likely to range from $100 million, or $240 psf per plot ratio (ppr), to $132 million, or $315 psf ppr, predicted property consultant Nicholas Mak, who is expecting between five and 12 bidders.

Mr Han and Mr Ho are more bullish about price and are expecting bids to come in at as high as $350 psf and $400 psf respectively.

With such bids, break-even levels may range from $600 to $700 psf, and the successful developer could be looking to sell the new units at $750 to $850 psf each.

The Serangoon Avenue 3 site - the fourth plot for residential use triggered for sale since last month - was made available for sale via the reserve list system.

Under this sale method, a site goes up for tender only if developers indicate interest by committing to a minimum bid.

Last week, a tender for a suburban condo plot in Chestnut Avenue attracted an impressive 13 bids of which the highest was at $280 psf of gross floor area.

The response was stronger than expected given that the site is located at quite a distance from the nearest LRT station.